Top 10 Reasons a Gas Tax Holiday is a Bad Idea

1. It’s Just a Gimmick
When it comes to campaigning, it is all about choosing the right words to use in your marketing. Anyone who remembers the phrases “weapons of mass destruction,” or “axis of evil” will know what I mean (how many times did we hear those phrases in the lead up to Operation: Iraqi Freedom?). In this election cycle, Senator Obama has made a strong effort to push the word “change,” which explains why the word is visible in almost every picture you see of Obama. Nonetheless the phrase “gas tax holiday” is merely another political slogan designed to encourage Americans to vote for a candidate.

2. Loss of Federal Revenue
If the federal government stopped collecting a tax on fuel, then it will be a direct loss of revenue for the government, plain and simple. With our economy continuing in a downward spiral, record breaking military expenses in the middle east, an ever increasing national debt, I doubt the government can afford to lose this source of revenue, let alone any.

3. Direct Impact on Working Families
If the government does not have revenue from gas taxes, then it is going to have a direct effect on people working in the construction industry. The tax levied on gasoline and diesel is what pays for highway and road construction. Without this money, the government would not be able to pay those working in this industry. Some estimates put the number of lost jobs at over 300,000, which does seem slightly inflated to me. However, any reduction of the tax collected from gasoline will definitely result in lost jobs.

4. Poor Quality Roads
The lack of federal transportation revenue will impact more then just those working in construction. The condition of our roads and highways is deteriorating, and without revenue to fix them the condition will only get worse. So a gas tax holiday may save you some money this summer, but you will probably regret the money this fall when you are stuck in hours of traffic on your way to work.

5. State Gas Taxes
The gas tax holiday only applies to the federal excise tax of 18.4 cents on gasoline and 24.4 on for diesel. However, these are not the only taxes that consumers pay on fuel. Nearly every state has their own tax, and some are upwards of 40 cents per gallon. The gas tax holiday would do nothing about these state fuel taxes.

6. Bad Message
Earlier in the week, polar bears were officially added to the added to the endangered species list. What does that have to do with a gas tax holiday? Well, exhaust fumes are bad for the environment and could lead to pollution and harm to the environment. Also, with the added threat of global warming looming, shouldn’t the government be discouraging motorists from using excess gasoline? In Europe, the taxes on fuel are higher then in the United States and consequently there is less gas consumption. If anything, our government should be encouraging people to reduce their gas consumption. How about increasing hybrid credits?

7. Increased Demand = Higher Prices
Many economists are claiming that lower prices will correlate directly to an increase in demand, which on the open market will likely increase the cost of fuel. Some argue that since gasoline is traded on the world market that we will not see a price increase. However, it is obvious that if gas was cheaper people would use more of it.

8. Continued Record Oil Profits
With the increased demand that would result from a gas tax holiday, some estimate that it would give even more revenue to the big oil corporations. These corporations already post record breaking profits every quarter for the last five years. Instead of lowering fuel taxes on consumers, why not increase taxes on the oil corporations?

9. Does Not Solve Anything
A gas tax holiday ignores the bigger problem; this country is dependent on foreign oil. It will do nothing to solve this problem. Gas prices are increasing at alarming rates and a small tax break is not going to stop prices from increasing in the long run.

10. Bottom Line: 30 Bucks
Let’s face it, all you really get under a gas tax holiday is about $30. Some estimates from Senator Clinton’s and Senator McCain’s camp say that this number is slightly higher, maybe $50. But what kind of effect is a $50 tax credit really going to have on the nation’s economy?

Sen. Hillary Clinton: a Deeper Look at her Tax Views

With only a few primaries left many people are pointing to Sen. Barack Obama as the victor of the Democratic nomination. However, Sen. Hillary Clinton is still committed to finishing the race on the claim that she is more likely to beat Sen. John McCain in the general election, and she does have statistics from national polls to back up her claims. The only hope for Clinton is if the delegates decide to give her the nomination since neither candidate will get the required number of delegates through the election cycle. Nevertheless, since Hillary is still considered one of the candidates for the Democratic nomination, I included her in my in-depth look at the candidate’s tax plans.

Gas Tax Holiday
Clinton’s support of a gas tax holiday has become a key component of her campaign in the remaining primary elections, however it has caused her more negative criticism than positive. At first the idea of a gas tax holiday seems like a good one. People across the nation are complaining about increases in the cost of fueling their vehicles and they want to get relief. By endorsing the gas tax holiday, it seemed like Clinton was making a good campaign move by showing Americans that she understood their hardships and wanted to do something about it.

However, soon it was clear to many that a gas tax holiday was little more then just a good campaign talking point. If enacted, experts agree that the holiday would do little to help the American consumers. Federal excise taxes on gasoline are under 20 cents per gallon, and eliminating the tax would do little to counterbalance the ever-increasing price on fuel. Additionally, by eliminating the tax it would cost the federal government upwards of $125 million that would usually go to federal road repairs and infrastructure improvements.

Finally, there is the problem of supply and demand, which I personally think has been slightly over-exaggerated. The argument is that with lower prices the demand would increase and there would be little benefit to consumers. However, its important to remember that the tax holiday would only apply to American taxpayers, and that the effects on the world market would be negligible.

Let Bush Tax Cuts Expire
Clinton and Obama are on the same page when it comes to President Bush’s 2001 and 2003 tax cuts – let them expire. In a democratic debate Clinton took a firm stand on this issue claiming, "I will make it clear that the Bush tax cuts on the upper income, those making more than $250,000 a year, will be allowed to expire."

"I will let the taxes on people making more than $250,000 a year go back to the rates that they were paying in the 1990s," she continued. Hillary has gone to great efforts to promote the fact that she wants to increase taxes on only the wealthiest Americans, not the middle class. However, conservative and "Reagan Democrat" voters often react negatively to any type of tax increase, regardless if it will directly affect their paychecks. If Hillary does win the nomination, she will need to really drive home the fact that the increase will not affect middle to higher middle income Americans.

Extend Low Income Tax Credits
Although Clinton does not favor as much lower income credits as Obama, she still does support extending additional credits targeting people living on low wages. One of the tax credits Clinton supports is extending the Child Tax Credit to cover the first year of a child’s life. Clinton aims to make it easier for parents to stay home and care for newborn children. "Our tax policies do not reflect the cost of raising children," claims Clinton. "We should expand the child tax credit for the first year of a child's life to help parents stay home and give lower-income parents who receive government support for child care the option to sue the subsidies to cover the costs of staying home and caring for their own children." Clinton’s plan to increase low income tax credits may sound nice, but without reducing their overall tax burdens, small credits can only do so much to help someone get out of poverty.

Strengthening the Middle Class
The biggest part of Hillary’s tax proposal is to help strengthen the middle class. "I am absolutely committed to not raising a single tax on middle class Americans," claimed Clinton. "In fact, I have a very specific plan of $100 billion in tax cuts. My priorities are middle-class tax cuts and support for the middle class, to make college affordable, retirement security possible, health insurance affordable."

The phrase "strengthen the middle class" is a great campaign move on Clinton’s behalf as studies show that people like to consider themselves middle class regardless of their actual income. Both the phrases lower class, and upper class have negative connotations so targeting the "middle class" has helped Hillary appeal to the general public. However, the government needs to make money somehow, and Clinton cannot expect to only raise taxes on the highest income individuals. The public does not generally favor unbalanced tax increases, and it will be difficult for Clinton to drastically increase taxes on the wealthiest while lowering taxes for everyone else.

Revise AMT & Index to Inflation
Although Clinton previously voted against reducing the AMT (alternative minimum tax) in the Senate, she now appears to support some revisions to the highly unpopular tax. "I'll tell you something that we are going to have to deal with, the alternative minimum tax, which falls heavily on a lot of you and your families," claimed Clinton at the 2007 IAFF Presidential Forum. "You know, for six years I've been saying, with all due respect, do the billionaires in America need more tax cuts? Don't you think we ought to cut the taxes of middle income people, in particular those who are going to be hit by the alternative minimum tax?"

As the AMT impacts more and more families the tax is being considered widely unpopular, and is something that all the candidates are striving to fix. However, along with Clinton’s overall plan to strengthen the middle class, you have to wonder where all this extra money is coming from? All the tax cuts and credits would cost the government billions of dollars in lost revenue, and I am doubtful it could all be made up for with taxes on the rich.

Affordable College Education
At the heart of her plan to strengthen the middle class is Hillary’s tax cuts designed to make college more affordable for everyone. "When it comes to higher education – we shouldn’t be playing catch-up with the world – we should be leading it," claimed Clinton in a press release about her plan. "I believe that college shouldn’t just be a privilege for the wealthy – but an opportunity for anyone with the talent, determination and ambition to learn. And I believe that every American should have access to lifelong learning opportunities – from apprenticeships, to community college, to the most select four-year institutions."

Hillary’s college plan would basically boil down to a $3,500 credit which she claims is enough to cover more than 50% of the cost of tuition at the average public institution. But with rising community college prices, and ten thousand dollar per semester bills at many universities, I wonder how big of an impact this credit will actually have?

Small Capital Gain Increase
Although Clinton has not gave an official yes or no on increasing the Capital Gain tax rate, she has noted that if she did increase the rate it wouldn’t be by much. "I wouldn't raise it above the 20% if I raised it at all," notes Clinton. Although a small increase would not generate as much revenue as Obama’s plan to nearly double the tax rate, it seems much more "doable." The increase would still generate billions of dollars in new revenue but would not have a massive impact on Americans who invest.

Economic Military Changes
Although her military and security plans do not have a direct impact on the taxes paid by Americans, it will have an impact on the country’s budget that will trickle down to taxpayers. Included in Clinton’s proposal are a few costly measures, including: redeployment of troops in Iraq, increased commitment to Afghanistan and Pakistan, increased military research budgets, and a pay raise for wartime troops.

Clinton, Obama, & McCain: The Good, Bad, & Ugly Candidate Tax Views

As the primary elections continue across the United States, I am keeping to my commitment to getting the candidate’s tax views more attention. So much attention is being placed on superficial topics that taxes are taking a back seat. Taxes and the economy will probably become a popular topic in the general election, but I strongly encourage every one to think taxes now! Read up on the candidate’s respective websites, and check out neutral information sources like SmartVoter.org.

At this point in the game there are only three major candidates left in the race. Each have quite different tax views. Below are the good, bad, and ugly tax views of each major remaining candidate.

Hilary Clinton

The Good

Let Bush’s Tax Cuts Expire

Ms. Clinton adamantly claims that the middle class has been ignored by the current administration and seeks to strengthen and grow the middle class and restore the basic bargain: "if you work hard and do your part, you can build a better life for yourself and your family." One method of doing so would be to let the Bush tax cuts expire. This may be a controversial view, but most liberals will agree that it’s essential for the improvement of the American economy. These tax cuts only go to the extremely wealthy individuals in the country and do nothing for the hard working American class. Although some argue that cutting taxes for the rich stimulates the economy, since these tax cuts were enacted the national debt has only increased. Most Americans are quick to judge any tax increase because no one likes paying more in taxes. However, I doubt any one reading this blog would be affected, as letting Bush’s tax cuts expire would only raise taxes on the super rich.

The Bad

Maintain Current Social Security Cap

Clinton supports retaining the current income cap on the Social Security tax, which is a good idea. Currently income over $102,000 is not subject to taxation from the social security tax. Therefore the top income earners do not pay the social security tax on their full income. Increasing the limit on the social security cap, or removing it all together, would create millions of dollars in additional federal revenue.

The Ugly

Mandatory Health Insurance

With heath care issues on the top of every one’s mind Clinton recently proposed the "American Health Choice Plan" which revolves around an individual mandate requiring everyone to have health insurance. Her plan would give more choices to taxpayers seeking health insurance without quite making it universally available through he federal government. Clinton claims her program would cost about $110 billion per year, but has not yet given any specific information on how the plan would be funded. The concept is not so bad on it’s own, but the lack of funding information makes this an ugly tax view.

Barack Obama

The Good

Tax Wealth More Than Regular Wages

One of the tax cuts enacted by President Bush was to drop the tax rate on capital gains from 20% to 15%. This was another tax break that specifically targets the wealthiest in this country who do not earn wages, but rather live off of investments and accumulated wealth. There’s no reason that capital gains should be taxed so much less then regular wages, and Obama agrees. By raising the tax back to 20% some studies estimate that an additional $100 billion in revenue could be generated for the federal government.

The Bad

New Tax Credits

Obama's tax plan features a prominent "Making Work Pay" credit that would offset federal taxes on the first $8,100 of a taxpayers earnings. It would essentially generate a credit of up to $500 for single persons or $1,000 per family. According to Obama this credit would eliminate income taxes for at least 10 million low-income Americans. The idea of lowering taxes for low paid working Americans is considered great by many liberals, but there isn’t really a need for a new credit to accomplish this. Instead, why not expand the Earned Income Tax Credit or the standard deduction amount rather than trying to get a new credit passed by codgers.

The Ugly

No Taxes For Senior Citizens

One of Obama’s tax proposals is to eliminate all federal taxes imposed on senior citizens making under $50,000 per years and not requiring them to file tax returns. This may be a good way to get the senior vote, but it’s much more complicated than it seems. First of all, senior citizens often have income from multiple sources including capital gains, dividends, Social Security, retirement plans, etc. Determining their exact income would still require the same effort as filing a tax return. Additionally, this plan gives special tax treatment to a group if individuals based solely on their age, which seems like borderline age discrimination. Why should a struggling single mother have to pay taxes on her $49,999.00 income when a retired grandmother would pay noting on the same income amount?

John McCain

The Good

Investment Tax Cuts

McCain is a strong supporter of lowering taxes to encourage economic growth, which is the dominant economic stance of the Republican party. Not only does he support renewing the Bush tax cuts, but he also favors numerous tax cuts. McCain hopes to reduce taxes on Capital Gains, Interest, Dividend, Investment income, and even corporate tax rates. And as if his tax cuts weren’t enough, McCain also supports a new rule that would require a 3/5-majority vote to raise taxes. In summary, McCain is a strong supporter of permanent tax cuts, and the Republicans love him for it.

The Bad

Continued War Funding

McCain is a strong supporter of the American military and the "War on Terror," with promises of a continued military presence in Iraq. According to his website, he believes that the answer to our current national security problems is to not "roll back our overseas commitments," but to increase the size of our Army and Marine Corps and continue the current War on Terror. McCain has recognize there is a problem with current military spending but has not provided any information on how to continue the military efforts while lowering the current $12 billion-per-month budget.

The Ugly

No Pledge Against Taxes

Although liberals typically support raising taxes to stimulate the economy, this view is very unpopular among republicans. McCain is one of the only republicans who ran for president this year who declined to sign the pledge put forth by Americans for Tax Freedom not to impose any new taxes or increase existing taxes. The conservative wing of the Republican Party are almost always against increasing taxes and this lack of a commitment could hurt his chances of winning the presidency.

Clinton Unveils $70 Billion Emergency Spending Plan

As we get closer and closer to the general election, economic issues are beginning to get attention. Earlier today presidential hopeful Hilary Clinton unveiled a new $70 billion emergency spending package designed to help those affected by the U.S. housing crisis and to help counteract an upcoming recession.

“Economists and politicians are finally waking up to what many of America's families already know: that we might be sliding into a recession," claims Clinton. "We need an immediate strategy to get our economy back on track. I would work with leaders from both parties to pass an aggressive, fast-acting stimulus package to create good new jobs and revitalize our economy."

According to Reuters, “Clinton's plan would provide $30 billion for an emergency housing crisis fund for states to help low-income families unable to make mortgage payments; $25 billion to help low-income families pay their heating bills; $10 billion to extend unemployment insurance for people unable to find jobs; and $5 billion for alternative energy programs.”